U.S. Natural Gas Export Permits Delayed Until Late Summer

By Katarzyna Klimasinska -
May 31, 2012

Consideration of licenses to export
natural gas from the U.S. will have to wait until at least the
third quarter, when a study is completed after a delay of
several months, according to the Energy Department.

Since Cheniere Energy Inc. (LNG) received a department permit to
ship gas from Louisiana last year, the agency suspended other
applications and commissioned a study of the impact of exports
on domestic energy consumption, production and prices.

The first part of the study was published in January, while
the second, initially scheduled to be ready in the first quarter
of this year, hasn’t been completed.

“The second part of the study, which will assess the
broader economic effects of increased natural gas exports, is
ongoing,” William Gibbons, an Energy Department spokesman, said
in an e-mail yesterday. “We expect to be able to release the
comprehensive study results late this summer.”

The assessments were initiated after complaints from
several U.S. lawmakers, including Representative Edward Markey,
a Massachusetts Democrat, and Senator Ron Wyden, an Oregon
Democrat, who said sales overseas might increase prices at home.

U.S. energy companies are concerned about the costs related
to the delays, said Bill Cooper, president of the Washington-based Center for Liquefied Natural Gas, which advocates for gas
shipments. Even after the study is published, it’s not clear how
quickly permits can be issued, he said.

‘Time Frame’

“We don’t have any time frame on that at all,” Cooper,
said in an interview. “It’s just totally up in the air.”

The permits are required to sell to countries that aren’t
free-trade partners with the U.S., a group that includes Japan
and Spain.

Trade in gas that has been liquefied for transport surged
50 percent last year as Japan sought to replace lost nuclear
power output and demand from the rest of Asia increased,
according to the Paris-based International Group of Liquefied
Natural Gas Importers. The nation imported 79.1 million tons of
LNG last year, 12 percent more than a year earlier, according to
the importers group.

Fukushima Disaster

Japan’s 54 reactors were shut pending safety checks after
last year’s meltdown at Tokyo Electric Power Co. (9501)’s Fukushima
Dai-Ichi plant in the northeast of the country. A government
panel said on May 12 that the world’s third-largest economy may
experience power shortages and blackouts this summer.

Japan’s Prime Minister Yoshihiko Noda raised U.S. gas
exports during a meeting with President Barack Obama in
Washington on April 30.

“We discussed in our meeting today expanding LNG exports
from the United States to Japan,” Noda said during a news
conference following the meeting.

Japan was the largest buyer of U.S. LNG exports in
February, purchasing 1,863 million cubic feet for $11.31 per
thousand cubic feet, according to the Energy Information
Administration. U.S. is exporting gas from a terminal in Alaska.

Japan paid $16 per thousand cubic feet, 32 percent more
than a year ago, to attract supplies in the first quarter,
according to Sanford C. Bernstein & Co.

Those prices are attractive to producers in the U.S. where
natural gas on the New York Mercantile Exchange was $2.503 per
million British thermal units in the first quarter, an
equivalent of $2.57 per thousand cubic feet. U.S. natural gas
prices declined 79 percent over the past four years, following
the increase in production from shale formations.